Tom Philpott: Pharmacy users dodge stiff October fee hikes – for now

Tom Philpott

By Tom Philpott

Published: Monday, September 17, 2012 at 02:14 PM.

With members of Congress focused on winning reelection, TRICARE pharmacy users will get a temporary reprieve from stiff co-payment increases on prescriptions filled at TRICARE retail outlets or mail order.

The 112th Congress has reconvened after a five-week recess, primarily to pass a “continuing appropriation resolution” or “CR,” which will allow federal departments, including defense, to continue to spend at 2012 budget levels until new funding bills are passed after the Nov. 6 election.

The CR drafted in the House, which both chambers are expected to approve next week before lawmakers resume campaigning, would expire
March 27, 2013
. That date, however, does not remove the threat of budget “sequestration” on Jan. 2 when deep, across-the-board cuts in federal programs are scheduled to take effect unless Republicans and Democrats can cut a major deficit-reduction deal.

The CR will allow the House and Senate to delay passing a final defense authorization for fiscal 2013, which begins Oct. 1. And that is where the reprieve occurs for users of the TRICARE pharmacy benefit.

Both the House and Senate versions of the defense bill block the Obama administration’s plan to raise TRICARE enrollment fees on military retirees, but they would allow hefty increases in co-pays at TRICARE retail pharmacies and through mail order or “home delivery” program.

Language in the House bill (HR 4310) is more favorable to beneficiaries, allowing only part of co-pay increases sought by the Department of Defense. Out-of-pocket costs for drugs dispensed at retail pharmacies in the TRICARE network would increase from $12 to $17 on brand name drugs listed on the military formulary. Co-pays for non-formulary brand name drugs would climb from $17 to $44.

With members of Congress focused on winning reelection, TRICARE pharmacy users will get a temporary reprieve from stiff co-payment increases on prescriptions filled at TRICARE retail outlets or mail order.

The 112th Congress has reconvened after a five-week recess, primarily to pass a “continuing appropriation resolution” or “CR,” which will allow federal departments, including defense, to continue to spend at 2012 budget levels until new funding bills are passed after the Nov. 6 election.

The CR drafted in the House, which both chambers are expected to approve next week before lawmakers resume campaigning, would expire March 27, 2013. That date, however, does not remove the threat of budget “sequestration” on Jan. 2 when deep, across-the-board cuts in federal programs are scheduled to take effect unless Republicans and Democrats can cut a major deficit-reduction deal.

The CR will allow the House and Senate to delay passing a final defense authorization for fiscal 2013, which begins Oct. 1. And that is where the reprieve occurs for users of the TRICARE pharmacy benefit.

Both the House and Senate versions of the defense bill block the Obama administration’s plan to raise TRICARE enrollment fees on military retirees, but they would allow hefty increases in co-pays at TRICARE retail pharmacies and through mail order or “home delivery” program.

Language in the House bill (HR 4310) is more favorable to beneficiaries, allowing only part of co-pay increases sought by the Department of Defense. Out-of-pocket costs for drugs dispensed at retail pharmacies in the TRICARE network would increase from $12 to $17 on brand name drugs listed on the military formulary. Co-pays for non-formulary brand name drugs would climb from $17 to $44.

For mail order, the House plan would increase the co-pay for a 90-day supply of brand name drugs on the formulary from $9 to $13, while the $25 co-pay for non-formulary drugs would jump to $43. There would be no cost for generic drugs by mail order and the charge would be $5 at retail outlets.

The House bill also would allow annual increases in these drug co-pays beginning Oct. 1, 2013, but these adjustments would be capped to the percentage rise in cost-of-living adjustments for military retired pay.

The House also would require DoD to conduct a pilot program for five years on TRICARE for Life users — beneficiaries age 65 and older. They would be required to obtain refills of all maintenance drugs through the mail order pharmacy. They could opt out of this arrangement after a year. Also, the mail order requirement for TFL beneficiaries could be waived, on an individual basis, if personal circumstances warrant.

These House-passed changes were to take effect Oct. 1 to save the Department of Defense an estimated $590 million in the new fiscal year. But that is sure to be delayed given stalled progress toward passing a final bill.

In the Senate, the armed services committee voted out its version of a defense authorization bill (S 3254) in June. The full Senate won’t vote on the bill until after the election, however. The bill so far places no restriction on the Defense Department’s existing authority to adjust pharmacy co-pays. So, in effect, it green light changes sought by the administration.

That plan, unveiled in February, would raise co-pays on brand-name drugs at TRICARE retail pharmacies from $12 to $26 and allow increases thereafter of $2 a year until hitting $34 in October 2016. Co-pays for brand drugs through mail order would jump from $9 to $26 for a 90-day supply, and climb annually to reach $34 by 2016.

Under both the House bill and the DoD plan, base pharmacies would continue to fill prescriptions at no charge and the co-pay on generic drugs at retail would remain $5 for several years.

But in 2017, the department would end the policy of dispensing generic drugs for free through mail order. The co-pay would be $9 for a 90-day supply of generic drugs by the mail or a 30-day supply at retail outlets.

By law, co-pays on brand name drugs for active duty families can’t exceed 20 percent of the military’s average cost to procure them. For retirees, co-pays on brand name drugs can’t exceed 25 percent of cost. Presumably these limits aren’t exceeded under the department’s plan.

Pharmacy officials say the goal is to encourage use of mail order or base pharmacies because brand name medications filled at retail outlets cost taxpayers 27 percent more. The government’s average cost for a year’s worth of a brand name medication at retail is $1156 versus $840 through mail order. If generic drugs are used instead, that average falls to $200 a year regardless of where the generic drug is dispensed.

In 2017, the department wants co-pays adjusted yearly to match medical inflation. The House seeks to soften that blow by limiting yearly hikes in co-pays to no more than percentage increase in military retired pay.

But with Congress focused on reelection, the Senate won’t pass its defense authorization bill until at least mid-November. A House-Senate conference committee then will have to iron out differences between the two versions of the bill including the details on new pharmacy co-pays.

Last June, soon after the Senate committee voted out a defense bill with no language to block that administration’s co-pay plan, the Department of Defense published a proposed regulation in the Federal Register to prepare the way for charging beneficiaries higher co-pays.

In an election year, however, strange things can happen. On July 5, nine days after the draft regulation was published, a new posting in the Federal Register withdrew it.

TRICARE officials had no immediate comment on why the draft regulation was shelved, nor would they comment on what changes might occur this year in drug co-pays for military beneficiaries. For now, a plan to raise co-pays to what officials called “a more realistic level after a decade of no change” is sidelined. And beneficiaries aren’t complaining.